Mortgage Myth Busters: Do you read a post and spread the word? Or do you do your own homework?

Do you read a post and spread the word? Or do you do your own homework?

Do you read a post and spread the word by either creating your owner post or reblogging the post? Or do you read a post, do your homework to confirm the accuracy, and then create your own post?

In today's AR Newsletter, a post was shared written by Lenn Harley called "Are Mortgage Loan Origination Fees Deductible....." 

Within the post, Lenn points out that Loan Origination Fees ARE deductible. The fact of the matter is that not ALL situations are the same. To her credit, Lenn does provide the IRS website and instructs her readers to check it out for more details. She even states to not listen to your Realtor or Loan Originator, but to contact a CPA or Tax Expert for clarification.

I too suggest contacting a CPA, but I wanted to share some helpful tips for when a Loan Origination is Tax Deductible and when it is not.

In today's market, the Loan Origination is more often the fee paid to the lender/loan originator for doing business with that company. The "Discount Point" is typically the fee that is applied towards getting a "below PAR" interest rate. In essence, paying a fee specifically to lower the rate from XXX to XXX. This is typically called a Discount Point or Discount Fee.

 

According to the IRS Site, a 'POINT' is defined as:

The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.

As you can see, a POINT could be called many things. The first thing you ask your Loan Originator is 'Does this CHARGE (no matter what the name) Lower The Interest Rate?'. If the answer is YES, then this is step one to writing off this charge on your taxes. Why? Because the fee is a direct result of a Lower Interest Rate. If the charge is just a charge paid to the Originator, then the fee is NOT deductible. You can not always tell by just looking at the Fees Breakdown.

In some cases the buyer (or homeowner that is refinancing) will pay a Loan Origination Fee AND a Discount Fee. In this scenario, it is very clear that you are paying a fee to drop the rate... although its not always obvious which is which. Ask your Loan Originator, make a note of it, and then discuss it with your CPA when the time is right.

What is extremely helpful for buyers today is that the new GFE (Good Faith Estimate) clearly states "Borrower Pays a Charge Of XXXXX.XXX For This Interest Rate Of XX.XX%". This was placed on the new GFE to make it very clear and helpful to buyers. As long as the buyer has received the GFE (which they always should) then it should also be clear that the paid a FEE to get the lower rate (Discount Fee).

My overall point to this post is to be sure to do your own homework before Reblogging a post OR before you spread the word to your buyers. Sometimes a post has all the information you need and other times the post is stating facts (or what they consider to be facts). Check it out for yourself!

 

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Are you looking to purchase a Texas home?  Perhaps you love your Texas home but would be interested in refinancing your Texas mortgage to a lower interest rate?  

I'll help you get pre-approved for your Texas home loan and even suggest some very knowledgeable and professional Real Estate Agents in your area of choice.  If you are available to talk, I am available to listen.  Give me a call or visit my website for more details.

Do you want to know all of your mortgage options? Call me today and let's discuss them further.

Texas Home Loan Consultant

Always available for your Texas Mortgage and Home Loan needs!

John R Cannata    P#214.728.0449

NMLS # 322646

Texas Home Loan Expert

Frisco TX Mortgage

      

 

The views expressed on this site are mine alone and do not reflect the views of my employer.

Comment balloon 31 commentsJohn Cannata • July 26 2010 01:46PM

Comments

John... this is so true, to know and understand what you are referencing to...  And I agree for the most in what you mentioned regarding fees and points. But one main thing, unless I am missing something... in regards to the origination fee, you could only assume if it's to pay down the rate, hence why I think the IRS allows this in their descriptions.  Just my opinion and hence why I just tell them to speak to an accountant.  thanks and good post.

jeff belonger

Posted by Jeff Belonger, The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans ( Social Media - Infinity Home Mortgage Company, Inc) over 10 years ago

Thanks Jeff. I agree that you should get the facts from the Loan Originator as to what the fee is about and always consult a CPA when reporting it on your taxes.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

John,  More often than not, I answer with...Let me get you the number of 2 or 3 tax experts, or you can call yours at home.  I work hard to be knowledgeable in real estate, i don't pretend to know everything.  I applaud those that do know.

Posted by John Howard, GRI, Mountain Home, Arkansas 870-404-3614 (Century 21 LeMac Realty) over 10 years ago

John - Its too hard to know EVERYTHING. Just surround yourself with expert on the topic and refer to them. I strongly believe in that as well.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

I've never heard of the loan origination not resulting in a lower rate, so I would assume all are a tax write-off.

Posted by Donna Harris, Realtor,Mediator,Ombudsman,Property Tax Arbitrator (Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com) over 10 years ago

Donna - It all depends on who you are doing business with and their 'verbiage'. If you are dealing directly with a Bank, then they may call it a Loan Origination (used as a Discount Fee and resulting in a lower rate ... aka Below PAR rate). Not always the case though. Its best to clarify whether the Origination is for a lower rate or is a fee of the Bank itself. If the fee is to lower the rate, the right verbiage should be Discount Fee or Discount Point. Never assume its to lower the rate though because in many instances, its not. 

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

Good job in explaning all this to me John. But of course, I already got a head's up.

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co.) over 10 years ago

I like to write posts and then call you right away, Loreena. LOL

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

Excellent.  I appreciate the clarification on my post.  We can't be too careful around here, especially when the IRS web site is right there for us to read and we have all of these great loan officers to clarify. 

Thanks.

Jeff send me here.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) over 10 years ago

Impressive, John, if I do say so myself. Not being a loan officer, I wouldn't presume to write a post on that subject at all, deferring to the collective wisdom of those who are in the trenches dealing with it.

Posted by William James Walton Sr., Greater Waterbury Real Estate (WEICHERT, REALTORS® - Briotti Group) over 10 years ago

Hi John, Perfect timing on this post for me! As an AR newbie, I experienced a situation this weekend where an agent deleted my response because after reading his post, I saw some areas of concern & pointed out the inaccuracies with facts & reference points. He "scolded" me and basically told me that agents on AR wouldn't take well to having posts corrected. I love how you factually made your points, and Lenn graciously acknowledged and accepted your clarification. What a great learning environment for all of us. I knew that this would get better for me! I thank you both!

Posted by Stacey Johnson-Cosby, Selling Kansas City-Real Estate & City Blog (Reece & Nichols Realtors-Kansas City) over 10 years ago

Thanks for the clarification and ESPECIALLY the warning to take blogs with a grain of salt. Some of them are full of $(%* - and I'm not referring to Lenn's post - whether it be opinions stated as fact or just bad information. I've always thought that points were pretty much always deductible (although I've never told a client that, thank goodness) - now I know to delve a little deeper. 

Like Stacey, I have respectfully and gently pointed out where there was erroneous info in a post only to have my comment deleted along with a private message to mind my own business. Gotta love people who are concerned about accuracy.

Posted by Julia Odom, Chattanooga Homes for Sale (Select Realty Professionals) over 10 years ago

Hi John ~ I couldn't agree more. Check your facts and read, read, read. Lenn would be the first to agree with me there.

@Julia ~ It's seems you've tried to give some friendly advice in the community. Unfortunately that can backfire on you in a heartbeat, can't it?

Denise

Posted by Denise Hamlin, Broker/Owner, Helping Happy Clients Make Smart Choices (Cardinal Realty ~ 319-400-0268) over 10 years ago

Lenn - I appreciate the comment and for the LIKE on facebook. I completely agree with referencing the IRS site. Its easy to follow and I may not have had easy access to it had you not shared. :-)

William - Appreciate the kind words. This is why I love AR. Its a great place to Learn and Share.

Stacey - Perhaps it was the way you presented the 'corrections'. I certainly would not correct anyone publicly, at least not in a rude manner. A good example is how this post came about. On Lenn's post I just tried to provide further clarification. What she stated is correct, just not in all cases. She made the adjustments to her post and I had a good reason to write a post. :-)  I've certainly been corrected on my posts before about dates or perhaps even items that were not quite implemented yet, but I posted it as though it was a done deal. I thanked the person, made my adjustments, and moved on. No grudges. Perhaps the individual just didnt like to be corrected. Since I didnt see it, I can only make assumptions. So, I say this... be professional in your responses and MOST people on Activerain will response, adjust, and move on.

 

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

Julia - I've received comments like that. As long as they are not being disrespectful, I am not concerend with it... especially if they made a valid point. I comment to them, I'll adjust my post if need be, and I move on to my next comment or post. You'll find that most people are that way. People work Real Estate in different ways... and some do not like to be corrected. As long as you were respectful, then you are not breaking the rules. Continue to share your experiences and your knowledge.

Thanks Denise. I appreciate the comment and feedback to Julia.

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

Good point! We need to be careful with the re-blogging!

Posted by Jerri McCombs, Broker, Hendersonville NC Relocation (Dogwood Real Estate Services) over 10 years ago

Congrats on the well-deserved post John! You are the informed professional and this is one of the reasons that makes AR a great place to be! Thank you for that!

Posted by Wanda Kubat-Nerdin - Wanda Can!, So Utah Residential, Referral & Relocation REALTOR (Red Rock Real Estate) over 10 years ago

Hi John, well put and I agree that posting accurate, informed information is so important when many bloggers do NOT do their homework and/or deal in generalizations!

Posted by Russell Lewis, Broker,CLHMS,GRI (Realty Austin, Austin Texas Real Estate) over 10 years ago

I love calling the shots, John. 2 in a row. You are really getting smart. So whacha gonna do about your profile photo? LOL.

Posted by Loreena and Michael Yeo, Real Estate Agents (3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co.) over 10 years ago

Do your homework, sor sure...and snopes.com can't verify everything! Thanks for a great post, making this subject so much more understandable.

Posted by Mara Hawks, Inactive-2012 REALTOR - Homes for Sale Auburn Real Estate, AL (First Realty Auburn ) over 10 years ago

Great post John,  All the comments were great too. I have to agree with Loreena, when are you changing your photo:)  Have a great week!!!!!

Posted by Ricki Eichler McCallum, Broker,GRI,ABR, e-Pro, TAHS (CastNet Realty) over 10 years ago

John, good advice to pass on before hitting the reblog button.  I once came across a post on AR, if I remember correctly, someone reblogged another's post, the reblogger then found out that the first post I think was plagiarism or something like that.  Depending on the nature of the post, sometimes doing your own research is best before reblogging.  Thanks for the clarification too on the loan origination fees.

BTW - I love that profile picture!!

Posted by Gina Chirico, Real Estate Agent - Essex County, New Jersey (Lattimer Realty) over 10 years ago

John, thanks for the clarification. Gina #22, just today I found a post that printed a full article, and then gave a link to that article. It's when I went to the link that I found the article was copied in full. So I didn't comment at all. Didn't want my name attached to that post.

Posted by Bill Travis, Broker/Owner (Captain Bill Realty, LLC) over 10 years ago

GREAT POST!!, you did a great job, I personally do a bit of it all.  I do reblog if i find an article that is interesting, I will also take the post and do some research and add to it.  I think a good blogger does a bit of it all!

Posted by Ken's Home Team LLC. | 360.609.0226 | Portland, OR & Vancouver, WA Real Estate Team, - SOLD IS OUR FAVORITE 4 LETTER WORD - (Ken's Home Team LLC.) over 10 years ago

Yeah... I've been looking at changing my profile picture. On that day I was feeling silly.  I'll work on putting a better one up soon.

Thanks for the comments!

Posted by John Cannata, Texas Home Mortgage - Purchase or Refinance (214-728-0449 http://TexasLoanGuy.com) over 10 years ago

John, Great post. Congrats on the feature. That is a gold star I see isn't it? Words cannot express how I feel about my CPA!!

Posted by Charles Edwards Bentonville, AR REALTOR, Bentonville Real Estate Agent and Broker (Coldwell Banker Harris McHaney & Faucette 479-253-3796 ) over 10 years ago

John, Great post. Congrats on the feature. That is a gold star I see isn't it? Words cannot express how I feel about my CPA!!

Posted by Charles Edwards Bentonville, AR REALTOR, Bentonville Real Estate Agent and Broker (Coldwell Banker Harris McHaney & Faucette 479-253-3796 ) over 10 years ago

John.....

Everything I write ....is submitted for peoples consideration. I right what I know to be true......Common sense would dictate that before proceeding on anything you have read or heard......check it out for your self and decide what to do with it after that......I believe the concept here is to share, broaden, expand, dialog and contribute......not re-write the ten commandments.....in every post. Let's keep this simple or the joy or communicating will diminish.......thank you for your post......well done

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) over 10 years ago

John - Excellent point and clarification.  Congrats on the featured post!!!

Posted by Michelle Gibson, REALTOR (Hansen Real Estate Group Inc. ) over 10 years ago

John,

Thank for the great post.  Good to see you back in the rain.

Posted by Richard Weeks, REALTOR®, Broker over 10 years ago

Great post/information! 

Posted by Michael Pond, The Michael Pond Team (Guaranteed Rate, Inc) over 10 years ago

Participate